Employee Share Plans in Europe and the USA - Sorainen

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Employee Share Plans in Europe and the USAItalyassets are deposited with an Italian based intermediary, this reporting obligationfalls on the intermediary 6 .3. Financial assistance3.1 Italian company: An Italian company may make loans or provide guaranteesfor the purpose of enabling or facilitating the subscription or acquisition of itsshares by employees (or by employees of its subsidiaries or its controllingcompanies). However, the overall amount of the loans granted and/or of theguarantees provided must not exceed the aggregate of the Italian company'sprofits and its distributable reserves, as shown in that company's latest dulyapproved financial statements.3.2 Italian subsidiary of non-Italian company: In the absence of a specific ruleunder the Italian Civil Code, and by way of interpreting the rationale behind thefinancial assistance regime applicable to Italian companies, it can be argued thatan Italian employer may make loans or provide guarantees for the purpose ofenabling or facilitating the subscription or acquisition by its employees of sharesin its non-Italian parent company. However, the overall amount of the loansgranted and/or of the guarantees provided must not exceed the aggregate of theItalian company's profits and its distributable reserves, as shown in thatcompany's latest duly approved financial statements.4. Taxation of share acquisitions4.1 Employee tax and social security contributions4.1.1 Tax: An employee who acquires shares in his employing company, itsparent company or another group company free of charge or at adiscount will normally be liable to pay income tax. The tax charge is onthe relevant employment income, which is equal to the differencebetween the market value of the shares (calculated under Italian taxlaw) 7 at the time of acquisition and the amount, if any, paid for theshares. For the 2010 tax year personal income tax rates range from 23%to 43%. Personal income taxes are increased by regional and municipalsurtaxes applicable at different rates depending on the region and67Furthermore, in cases where foreign financial assets are held through an Italian based financialintermediary under specific optional regimes, full relief from such reporting obligations may beobtained.Market value of listed shares is usually defined as the average trading price of the shares during theone-month period immediately preceding the acquisition date. If the shares are unlisted, market valuemust be determined by reference to the net worth of the issuing company (generally determined by anindependent expert).UK/1729295/03 115 September 2010
Employee Share Plans in Europe and the USAItalymunicipality of residence of the employee (in general, the regional surtaxrates vary from 0.9% to 1.4% and municipal surtax rates vary from 0% to0.8%).However, where shares are offered (free of charge or at a discount) toall employees 8 , the difference between the market value (for taxpurposes) of the shares and the amount (if any) paid is not taxable up toa threshold of approximately €2,065 9 for each tax year. However, theshares must not be repurchased by the issuing company or theemployer (if different) and must be held by the employee for a minimumof 3 years. If the holding period requirement is not met, or if the sharesare repurchased by the issuing company or the employer (if different),income tax will be payable in the tax period in which the sale takes placeon the amount that was not taxed when the shares were acquired.4.1.2 Social security contributions: In principle, social securitycontributions are due if and to the extent income tax is due. Anemployee will be subject to social security contributions on the amountsubject to income tax at rates ranging from approximately 8% to 10% 10for the 2010 tax year. The rates depend on the employer's industry andon the number and category of employees.However, there are some specific exceptions to this principle, i.e. thereare circumstances in which employment income arises for tax purposesbut is not subject to the payment of social security contributions. Onesuch exception is that social security contributions are not due onemployment income arising for tax purposes from share option plans8910In circumstances where certain employees are expressly excluded from the share offer, the exemptionregime would not be applicable. In this respect in the opinion of the Italian tax authority (expressed inResolution 2002, n.3) the requirement to offer to all employees is considered satisfied if the grant of theright to acquire shares is aimed at all employees with a permanent contract. The exclusion from theshare plan of employees with a fixed term contract should not prevent the €2,065 exemption fromapplying.Precisely €2,065.83.There are minimum earnings thresholds which vary depending on the business industry and accordingto the employees' category. The Italian Social Security Agency has fixed a maximum annual earningscap (€92,147.00 for 2010). Once exceeded, social security contributions are not due, but this appliesto employees only if (i) the employee had registered with the mandatory social security system startingfrom 1996 and had no social security contributions paid before 1996; or (ii) the employee was alreadyregistered before 1996 but had opted for a new way of calculating his pension, having met the relevantrequirements; and to some kinds of consultants falling within the category of the so-called "coordinatedand continuous collaborators", which in principle also includes directors not otherwiseenrolled in a professional pension scheme.UK/1729295/03 116 September 2010
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Employee Share Plans in Europe and the USA - Sorainen

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